September 27, 2010 6:08 pm

Swimming upstream: the big fish among the boutique investment banks

In the aftermath of the financial crisis, amid the wreckage of some of Wall Street’s most venerable investment banks, independent advisory firms that had long nipped at the heels of the bulge bracket sensed their time had come. Boasting decades-long relationships with senior executives and free of the conflicts that can hamstring full-service rivals, they believed the instability that had rocked the sector would create opportunities for truly “independent” advice in the boardroom.

Two years on, however, the picture is more mixed. The long-predicted revival in the mergers and acquisitions markets has only just started to take hold, with big mandates still few and far between.

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While winning roles on several high-profile transactions, boutiques as a group have failed to seize market share. So far this year, independent advisory firms have advised on deals worth $483.5bn, representing 25.4 per cent of total announced M&A, according to data from Dealogic. That compares with all of last year when boutiques advised on $617.8bn-worth of deals, accounting for 26.4 per cent of total announced M&A volume.

Some of the firms typically included in the “boutique” category, specifically Lazard and Rothschild, are too big and dominant to fit the description. Instead, the FT has profiled some of the sector’s rising stars, as well as its more established forces.

Evercore

Founded in 1996 by Roger Altman, the former deputy secretary of the US Treasury, Evercore ranks among the largest of the independent investment banks. Listed on the New York Stock Exchange, the group employs 550 people and has spent the past year building its business in areas such as asset and wealth management. Under chief executive Ralph Schlosstein, Evercore is also starting up a sales and trading business and is expanding its geographical reach. In addition to its alliances with banks in Japan and China, Evercore recently bought a 50 per cent stake in G5, an independent Brazilian advisory firm.

Greenhill

While other boutiques have expanded their businesses into new areas, Greenhill has notably stuck to its knitting, focusing on providing independent advice to its clients on dealmaking, restructuring and capital raising. The NYSE-listed group, founded 14 years ago, now has 12 offices globally and recently acquired Caliburn, the Australian independent financial adviser. Among the largest of the independent firms, Greenhill this year advised industrial technology company Emerson on its unsolicited $1.5bn bid for UK rival Chloride.

Foros

Jean Manas left his post as US head of M&A at Deutsche Bank last year to start his own firm. In its first year, Foros advised on 10 deals, including the $5.2bn buy-out of IMS Health in November 2009. Intent on growing at a measured pace, Foros employs just 12 bankers. That means eschewing the weighty pitchbooks that large banks use to win business. “The sophisticated clients recognise that not very much customised thought goes into those big books,” says Mr Manas. “They recognise that they will get more value where there are back-and-forth conversations and focused analyses.”

Perella Weinberg

Perella Weinberg Partners was launched in 2006 by Wall Street stalwarts Joe Perella, Peter Weinberg and Terry Meguid. Backed by 12 investors, the firm stresses its role as an adviser – whether on clients’ investments or their strategic options. It focuses on corporate advisory and asset management, with more than $6bn under management. “We are trying to replicate the old firms of Wall Street and the City of London in the sense that we are singularly focused on serving the client,” says Mr Weinberg. “We like the discipline and teamwork that results from operating as a privately owned partnership.”

Blackstone Group

Blackstone’s advisory group is headed by John “Studz” Studzinski, the former HSBC and Morgan Stanley star. Set up in 1985 by Steve Schwarzman and Peter Peterson as a “pure play” M&A boutique, the company grew into one of Wall Street’s biggest leveraged buy-out and real estate specialists, as well as the world’s largest private equity firm. Its advisory business has made dramatic gains in the M&A league tables in recent years, acting for GDF Suez on its tie-up with International Power and advising AIG’s board of directors on the $15.5bn sale of Alico, its foreign life insurance business, to MetLife.

Centerview Partners

Founded four years ago by a group of senior Wall Street executives, New York-based Centerview Partners has rapidly climbed the advisory league tables, winning mandates on some of the market’s biggest, most glamorous deals. Its choice mandates include advising Kraft, the US food maker, on its $17.4bn acquisition of the UK’s Cadbury and News Corp on its $5bn deal for Dow Jones. The boutique, which also has a $500m private equity fund that focuses on US investments, recruited former US Treasury secretary Robert Rubin as an adviser earlier this year as the firm looks to further expand its profile.

Ondra Partners

Part of a rush of financial services firms founded in the wake of Lehman Brothers’ implosion in 2008, Ondra was set up by Michael Tory, Lehman’s former UK head of investment banking, as a boutique M&A and capital markets advisory franchise. Having quickly recruited a clutch of former Lehman colleagues, including Benoit d’Angelin and Adam Gishen, Ondra has since been involved in several big deals, including acting as an adviser to French utility GDF Suez on its $21.5bn asset merger with International Power, and completing its first significant IPO mandate with the listing of Gartmore, the UK fund manager, in December.

Allen & Co

Known for its annual pow-wow in Sun Valley, Idaho, that attracts media moguls from across the globe, New York-based Allen & Co specialises in advising the entertainment, communications and technology industries. Founded in 1922 by famed investor Charles Allen and run today by Herb Allen, the grandson of Charles’s brother, the famously private firm has thrived on developing close relationships with chief executives building next-generation businesses.

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